The Perils of Undisclosed Call Recording in California

Written by William I. Rothbard on Wednesday, December 4th, 2013

In line with the law in most states and best practice in the industry, most direct response merchants and their call centers presumably disclose the recording of customer calls. Those that don’t can face stiff penalties, both criminal and civil. Nowhere is this currently more true than in California, where the courts have been flooded with class actions brought under the California Invasion of Privacy Act (CIPA). This statute assesses a penalty per violation of $2,500 to $5,000. In a class action, that can add up fast, inflicting potentially ruinous liability on the accused.

Until recently, most CIPA actions were brought under Section 632, which prohibits the non-consensual recording of a “confidential communication.” The courts have defined “confidential” to mean an “objectively reasonable expectation” that a call is not being overheard or recorded. Effective notice that a call is being recorded should be enough to indicate that it is not confidential. Beyond that, whether an expectation of privacy during a call is “objectively reasonable” is a question of fact that’s answered by looking to several factors. These include: location (private or public); content (financial or other personal topics); duration (long or short); prior experience with business communications; initiator (consumer or business); and destination (i.e., toll-free number).
Regarding the last two factors, some California courts have held that calling a customer service number may evidence the lack of an objectively reasonable expectation of privacy. Such a finding could benefit a call center, but there is no consensus on the application of these or any of the other factors that inform the “objectively reasonable expectation” standard. The totality of the circumstances surrounding a call will determine whether or not it is found to be “confidential.”

That said, the factual, particularized nature of the confidentiality inquiry could make it more difficult to win class certification under Section 632 of CIPA. Recently, in an important California appellate decision, Kight v. CashCall Inc., the court decertified a class, holding that an inquiry into whether each member had an objectively reasonable expectation of privacy was necessary.

Given this adverse ruling under Section 632, resourceful plaintiffs’ lawyers have now begun to place heavy reliance on another part of CIPA that potentially sidesteps the “hassle” of having to prove confidentiality, while dovetailing nicely with today’s pervasive use of cell phones. Section 632.7 of CIPA, in contrast to Section 632, contains no express confidentiality requirement. It simply prohibits the secret recording of “a communication” involving the use of a mobile or cordless phone. Faced with an inundation of Section 632.7 cases, defendants have asked the courts to “read” a confidentiality requirement into the provision. Given that “confidential” is conspicuously absent there compared to its presence in Section 632, these efforts have been singularly unsuccessful. As a consequence, consumers in California who use a cell or cordless phone do not have to allege they had a reasonable expectation their call would not be recorded.

Still, putative class plaintiffs and their attorneys shouldn’t necessarily be seeing huge dollar signs just yet. Litigation surrounding CIPA 632.7 is still in its infancy and many questions remain undecided. Must the communication be recorded while being transmitted over the airwaves, rather than at its destination? Could the different treatment afforded to wireless phone use raise due process (i.e., arbitrary distinction between wired and wireless phones as to expectation of privacy) and class certification issues? Does Section 632.7 apply to phone calls made over the Internet?

While these and other unknowns are hashed out in the courts, DR merchants and their call centers shouldn’t wait for the answers. If you are recording calls from California residents without telling them, you are at risk of being the next casualty of the CIPA class action wave. Be smart. Start disclosing now.